How Do Bookmakers Make Money?

How Do Bookmakers Make Money?

Are you one of those bettors who loses money in the long run? If you’re wondering if it’s possible to make steady profits in sports betting, the answer is yes!

There could be several reasons why you don’t make enough profit in betting. One such reason is that the bookmakers use various techniques to ensure that they are always profitable. A bookmaker is an organization or person that accepts and pays off bets. It also sets odds on sports and other events.

Once you understand how bookies make money, you can use it to become a more successful and profitable bettor. So, let’s get started with our discussion on the methods bookies use to make money.

The Vigorish or The Overround

The primary way by which bookmakers put odds in their favor is by charging the vigorish. Vigorish is also known as the vig, margin, juice, or the overround. It is the commission or fee that bookies charge for laying bets. Bookies accept bets on a market and offer slightly lower odds than the actual probability. This implied probability results in an overround or profit margin, giving the bookies an advantage over the bettors. 

Let’s look at the example of a coin toss to understand the vig better.

There is a 50-50 chance of landing a head or a tail in the toss of a coin. Say, a bookmaker offered true odds of 2.0/2.0 on both sides. Then, a $100 bet would fetch a win of $200, including profit. But the bookmaker doesn’t make any money in this scenario. Hence, they offer odds below 2.0, say, 1.9091. So now, a successful $100 bet would return $190.91. This built-in profit margin of 4.5%  is the vig that the bookie gets with each toss.

Balancing the Book

A “book” is a recording of the bets that a bookie lays. Each possible outcome of any event is set so that the bookie makes a profit, no matter the result. The bookies ensure this by setting suitable odds for each possible outcome. Based on the market vagaries, the bookies adapt their odds in a way that doesn’t differ much from other operators. In this way, the bookies balance each other out, ensuring that they always have a mathematical edge against punters.

Bookmakers also have to decide how much they can afford to lose on the market. Thus, the number of punters betting on a market impacts the bookies’ odds and book balance. Nowadays, bookmakers have advanced technology to figure out the math. But the basic principle remains the same – ensuring a balanced book and making money regardless of the outcome.

Odds Compilation

The crux of betting boils down to predicting outcomes of sporting events. So, let us introduce you to the odds compilers. These are the people responsible for setting odds for bookmakers. The odds set by the compilers eventually dictate how much money the bookmaker is likely to make. This process of odds compilation is known as pricing the market.

Compilers consider several factors while pricing up markets for various sports events. The main aim is to set odds that accurately signify the likelihood of a particular outcome. At the same time, it should guarantee a built-in profit margin. Determining the probability of outcomes is mostly based on statistics and sound knowledge of sports as well. Compilers usually have a target margin and reduce the odds for each player accordingly.

So, when you’re betting, you are actually up against the compilers and trying to out-predict them. 

Multiple Bets and Accumulators

Have you ever wondered why accumulator bets attract the most bookmaker promotions? Whenever you place an accumulator bet, you compound the bookie’s margin. Accumulators are super fun when you are winning, but they are not great value bets. The more selections you add in your accumulator, the more margin you give to the bookie. As a result, the odds of your bet landing gets longer, and the bookmaker’s profit margin goes higher and higher.

So, now you know why bookies can afford to give free bets, accumulator insurance, or accumulator bonuses.

We discussed the concepts of over round, implied probability, book balancing, odds compilation, and multiple bets. These methods are the bookies’ basic instruments to ensure a steady profit. However, they don’t always make money on every market they price up. But the tactics make them profitable in the long run. But besides the mathematical advantage, bookmakers’ success also boils down to the lack of knowledge of bettors. The key to consistent profits is picking good bookmakers and following smart betting practices.

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